Stumpy, I'm not sure I agree with some of the numbers in your post.
I can't find the November 28 post that you referenced with a first oil date of early 2015. But the most recent pressuring up graphs and recent announcements have been forecasting late 2016, so the date of March 1, 2017 in the November 21 presentation seem more consistent.
I think the comment below that you quoted from the ELK web site on the Grieve project can be interpreted a couple of different ways.
"The operator has incurred additional expenditures beyond these joint venture costs for the CO2 pipeline to the field, the electrical infrastructure for the field and the CO2 recycling plant for the project, which is expected to cost $50 million and is currently under construction."
When the JV was formed ELK quoted the CO2 recycling plant as USD50 million and the CO2 pipeline as an extra USD1.2 million while the electrical infrastructure was a later addition. So maybe they have re estimated the total cost of all these facilities, or just rounded it all to USD50 million or perhaps the "which" in the sentence refers only to the CO2 recycling plant. I believe you are correct in your interpretation that the cost of all these facilities will be recovered once production starts through a 15 year lease. But Denbury won't have supplied the funding for these out of the goodness of their hearts and the lease payments by ELK will reduce the NPV of the project by several million USD.
I think you are wrong that any further additional field expenditure will be funded through lease payments once production starts. This applies only to those items listed above and the loan of USD12.5 million from Denbury which has been fully drawn down (and now accruing interest at 11%). Any further capital and operating expenditure over the next 2 1/4 years must be funded 35% by Elk. The November 21 presentation that you reference shows the estimate for 2015 as capital (ELK's share) US$0.65 million plus lease operating expense (again ELK's share) of ~USD1.25 million. A lot of the earlier ELK statements did claim that the project was fully funded through to first oil. But they were being hopelessly optimistic, at one stage believing that expenditure of only USD28.6 million was required before first oil. That claim of being fully funded through to first oil was totally blown out if the water when project expenditure exceeded USD62.8 million.
So in addition to the AUD2.5 million loan, we have immediate potential costs of AUD1.25 million for loan repayment on January 8 (way before any revenue can be received from the sale of the Grieve pipeline), Grieve costs for 2015 alone of USD1.9 million and that is before any administrative and staffing costs for ELK. Plus it does not include anything for the development of Singelton.
BTW the crude oil price used in the Ryder Scott analysis was US$86.40 per barrel. This is taken from
http://www.asx.com.au/asxpdf/20130212/pdf/42cz5mq81syjg3.pdf
This acquisition may be a calculated risk that could pay off in spades for MEL but based on the information currently available to me I see the likelihood of only a very small payoff, if any, (largely driven by the current oil prices) and quite a long and not inexpensive road to the end, funded by two juniors who barely have two nickels to rub together. We might get some indication of how good the deal is when we see how readily ELK can refinance the loan on January 8.
But it certainly does look like a very good deal for ELK, because I suspect that, except for the payment of AUD2.5 million by MEL, ELK would have been in default of the JV agreement by December 31 and Denbury may have been able to take over the asset with no further payment.. ELK holders have picked up AUD2.5 million and, irrespective of the way it ends up, lost 77% of the liability for the AUD1.25 million loan plus secured 23% of MEL's cash reserves of around AUD10 million (all up around AUD5.5 million in cash) all at a time when ELK had no cash and a market cap of AUD7.5 million. Based on my analysis the transaction represents payment of around 0.030 for each ELK share - so ELK holders really transfer less than AUD1.8 million in market cap to MEL holders. So there needs to be a really great payoff for MEL holders in the 77% of the Grieve project that they will hold.
Plus ELK has probably picked up all the funding required to bring Grieve into production. So at least it was a great Christmas present for ELK holders.
My desire at the moment is that the ASX forces MEL to release additional information to its shareholders so that they can be reasonably informed.
(20min delay)